International Research Journal of Finance and Economics
 Issue 113
 Aug, 2013
The Impact of Firm's Characteristics and Earnings Attributes on Information Content of Quarterly Earnings Announcements
Mohammad Ali Aghaii, Ali Saghafi, Gholam Hasan Taghi Nattaj and Jahanbakhsh Asadnia
The aim of this study is to investigate the impact of firm's characteristics and earnings attributes on information content of Quarterly Earnings Announcements of firms in Tehran Stock Exchange's information needs of stakeholders. To provide a measure of how much value-relevant information is provided at earnings releases, we calculate the adjusted R2 from a regression of calendar-year returns on returns in each of the four seven-day announcement “event windows” during the year. Therefore, the financial data of 106 firms for the period between the years 2006 to 2010 were analyzed. Results showed that announcement of quarterly earnings an average of 9 to 17 percent of total annual earnings affect stock prices of companies and this indicates that the announcement of quarterly earnings for investors and other stakeholders to provide timely information is not its role, increasing the reliability of sources of information is timelier. Also other results of this study show that there are a significant positive relation between the information content of quarterly earnings announcements and some variables such as growth opportunities and quality and nature of earnings and a negative and significant relationship with the size, financial leverage and age of firm.
Keywords: Quarterly earnings announcements, information content of earnings, Special characteristics of firms, Characteristics of firms earnings
A Study on the Business Ethics in Accounting and the Perception of Ethics by Professional Candidates
Ahmet Yanik, Ferah Yildiz and Nurcan Günce
Information of businesses including asset-resource structure and profitability is presented through accounting. Such information presented by affiliated or independent accounting professionals are important to those communities which are interested in businesses. Accuracy and reliability of information presented depends on the adherence of professionals to accounting laws and regulations in addition to ethical rules. In consideration of the above facts, this study was conducted for the purpose of presenting how undergraduate students of accounting perceive accounting-related ethical principles. Results of the study suggest a statistically significant difference between students' gender, where they were born and grew up, mothers' education and ethical principles whereas there was no significant difference between fathers' education and ethical principles.
Keywords: Keywords: Ethic, professional ethic, accounting ethics, accounting education.
Modeling Air Pollution Measurement in Malaysia Using Distance-Based Ranking Fuzzy Numbers Approach
Mohamad Idham Md Razak, Hj. Ismail Ahmad, Noradila Kedin, Mohd Hafifi Mohd Supir and Ghazali Semil@Ismail
Air pollutants can be either gases or aerosols which particles or liquid droplets suspended in the air. They change the natural composition of the atmosphere, can be harmful to humans and other living species and can cause damage to natural water bodies and the land. Anthropogenic specifically due to the human causes that in this study, it has been identified that Population, Gross Domestic Product (GDP) and Manufacturing Industry adaptive from IPAT Model are the major contributors to the emission of carbon dioxide. The major contribution of this study is by improving the IPAT’s fuzzy dilemma into better model using Distance-Based Ranking Fuzzy Numbers Approach introduced by Ahmad Syafadhli Abu Bakar, Daud Mohamad, Nor Hashimah Sulaiman (2012). The paper was written as to enrich the field of Ranking Fuzzy Numbers (RFN) as RFN is recognized with its ability on solving numerous decision making problems and has only being applied on Risk Analysis, Game Theory, Pattern Recognition and Artificial Intelligent. This study is the pioneer study using RFN in modeling Air Pollution measurement in Malaysia. The time series data gained and analyzed from the years 1970 to 2011 to explain the relationship among the carbon emission with the Population, Gross Domestic Product (GDP) and Manufacturing Industry. Hence, the forecasted value of Carbon emission can be used to assist the government in future planning and development.
Keywords: Air Pollution, IPAT Model, distance-Based Ranking Fuzzy Numbers Approach.
International Diversification A Small Equity Market Perspective
Gupta, R and Lin, S. L.
Investors can reduce their overall portfolio risk by diversifying into equities from other markets. Emerging markets have attracted significant interest because of their low correlations with the equity markets of the developed countries and with each other. Studies recently indicate that the correlations between equity returns of the developed markets with that of the emerging markets and between the emerging markets are increasing over time. Furthermore, research thus far has concentrated on looking at the benefits of diversifying into emerging markets from the perspective of an investor from the developed market. This paper contributes to the existing literature by using a multivariate GARCH model that allows correlations to change over time and incorporates asymmetrical effects. To overcome the problems of changes in correlations we use an Asymmetric DCC GARCH model to estimate time-varying correlations and include these correlation estimates in the portfolio optimization model. We look at the benefits of diversifying investments into emerging markets from the perspective of an investor in Taiwan to estimate the benefits of diversification by using the weekly returns for the period of June 1997 to May 2009. This study finds that, despite increasing correlations, there are still potential benefits for an investor from smaller emerging markets diversifying into international markets.
Keywords: Taiwan, Emerging market equities, Time varying correlations, Asymmetric Dynamic Conditional Correlation (DCC) GARCH models, International diversification.
JEL Classifications Codes: G11, G15, F37, F21
The Effect of Audit Quality on Voluntary Earnings Forecasts
Tzu-Ching Weng
The primary objective of this study is to examine the association between the quality of management earnings forecasts and audit quality, measured by the industry auditor specialists. Furthermore, this study also investigates whether market investors will give a higher premium for the forecasts of a firm audited by an industry auditor specialist. This study finds that clients of the auditor specialists have lower forecast bias, higher forecast accuracy and better market reaction. The conclusions remain unchanged after controlling for self-selection bias of the choice of auditor specialists, for another window of cumulative abnormal return, and for different measurement of industry-specialist auditor.
Keywords: Keywords: Audit Quality, Industry Specialist, Voluntary Earnings Forecasts
Analyzing the Relationship between Gold Price, US Dollar Rate and Turkish Stock Market
Gülfen Tuna and Ahmet Selçuk Dizkirici
4226-day data set including the variables as gold prices (USD/ounce), USD/TL exchange rate and ISE100 index in the period of 7/27/1995 to 6/24/2013 has been used to analyze the relationship between the mentioned variables in the study. To this end; ADF Unit Root Test, Vector Error Correction Model, Johansen Cointegration Test and Granger Causality Test are benefited so all the series become stationary after their first differences are calculated in intercept and trend model. According to Johansen Cointegration Test; at least one long run relationship exists between the three variables and finally Granger Causality Test based on VECM is applied. Consequently; the test results reveal that a two-way Granger Causality relationship exists between gold and rate series besides ISE100 index representing Turkish stock market and rate series have another two-way Granger Causality relationship since any Granger Causality relationship is not found between gold and ISE100 index. Hence; investing both in gold and ISE100 index at the same time is concluded to allow an effective portfolio diversification.
Keywords: Gold Price, Turkish Stock Exchange, US Dollar Rate, Cointegration, Causality
JEL Classifications Codes: C32, G11, G32, O16
Investigation of the Relationship between Working Capital Management and Investment and Financing Methods
Sayed Ali Miri, Sharokh Moori, Nazanin Hosseini and Somayeh Papi
One of the reasons which cause change in working capital from one period to another is the change in management efficiency. The change in management efficiency will affect the change in working capital in a way as increaser or reducer from one period to another. In this study, the effect of working capital management in to the debt financing is studied. The data of this study covers yearly financial statements of 75 manufacturing companies which were in operation in Tehran Stock Exchange (TSE) between the years 2007 and 2011. Results shows that there is no non-linear relationship between debt financing and working capital management and this fact is also confirmed by linear analysis, and this is because results of quadratic analysis shows a linear and line for this relationship.
Keywords: Debt financing, linear relationship, non-linear relationship, quadratic, working capital management.
Testing the Market Timing Theory of Capital Structure: The Case of Egypt
Marwan Mohamed Abdeldayem and Mohamed Saleh Assran
The aim of this study is to investigate how capital structure decisions made by the non- financial firms registered in the Egyptian Exchange (EGX) are affected by the predictions of the market timing theory. In order to test the market timing theory in Egypt, we adopted the model of Baker & Wurgler (2002). Therefore, we used a set of relevant variables of 44 non-financial listed firms from the Egyptian Exchange (EGX) for a period of 8 years, from January 2001 till December 2008 which can reflect the market timing signals. We found evidence that leverage ratio of the Egyptian firms is short- term driven by their current market valuations, however, in the long term; the market timing effects were not present at all.
Keywords: Market Timing Theory, Capital Structure, Leverage Ratio, Current Market Valuations, Egyptian Exchange (EGX)
Effect of Corporate Social Responsibility Disclosure on Stock Returns in Thailand
Ravi Lonkani and Ratchaneeya Bangmek
Whether the corporate social responsibility disclosure conveys significant information on a firm’s value to the market is questioned and tested by measuring its effect on the stock returns in the Thai stock market. We classify corporate social responsibility disclosure in a firm’s annual report into four key dimensions; social involvement, human resource management, environmental concern and product safety operation. Results show that corporate social responsibility disclosure level is positively related to the stock returns after controlling for firms’ characteristics and typical risk factors. Moreover, empirical findings demonstrate that external concern on social quality dimension of corporate social responsibility, such as environmental concern, is closely related to stock returns more than other social responsibility dimensions. The corporate social responsibility disclosure level is also varies among industry in which we find that resources industry (energy & utility, mining sector) has the highest average of disclosure score. These findings support the practice of non-financial information revealing in the annual report of a firm.
Keywords: Corporate Social Responsibility Disclosure, Voluntary Disclosure, Stock Returns, Value of Firms
JEL Classifications Codes: G14, G32, M14, M41
Long Memory Processes and Structural Breaks in Stock Returns and Volatility: Evidence from the Egyptian Exchange
Hassan Ezzat
This research investigates the presence of structural breaks in the indices of the Egyptian stock market using the Bai-Perron strcutural breaks test. The indices used are the EGX 30, the EGX 70, the EGX 100, and the EGX 20. The presence of long memory is then investigated using the GPH test and the modified GPH test by Andrews and Guggenberger for the full sample and the identified break periods for each index. Finally, an EGARCH model is estimated for the full sample and each break period. Structural breaks were identified triggered by the subprime crisis and the world financial crisis for three indices. Structural breaks triggered by events of the Egyptian revolution were accurately identified for one index. For the daily returns of the EGX 30, EGX 70, and the EGX 100 long memory is found to be spurious while for the EGX 20 long memory in returns is more apparent. For volatility, real long memory is present in the EGX 30, the EGX 70, and the EGX 20, while spurious long memory is present in the EGX 100 because of the presence of periods exhibiting strong anti-persistence. The EGARCH parameters for the full sample were found to be significantly different from the specifications for the break periods for each index. It is concluded that structural breaks are clearly present in the indices of the Egyptian stock market and have considerable impact on the dynamics of daily returns and volatility.
Keywords: The Egyptian exchange, long memory, GPH, structural breaks, EGARCH.
JEL Classification Codes: C32, C58, C140, D53, G17
2007-2008 Global Financial Crisis and Financial Instability Hypothesis of Minsky
Hüseyin Tezer
In this paper, we investigated the Global Financial Crisis of 2007-2008 with the help of Minsky’s Financial Instability Hypothesis. Minsky’s “Financial Instability Hypothesis” in the cyclical fluctuations of the investments cannot be explained without considering the advocates of financing. Creating the hypothesis, situated in the business cycles, government, household, firms and the financial institutions affected by the economic structures in the process, (Hedge, Speculative and Ponzi Finance) operation of the three circuits modelled. Occurrence of crises, explains how these three financial cycles. Financial Instability Hypothesis, structural conditions in the financial markets to be effective in explaining the advanced capitalist economic systems, although effective is different from the degree of economic development aspects in the markets appears to be missing from the assessment of the crises.
Keywords: Financial Instability Hypothesis, Economic Crisis, Financial Instability, Uncertainty, Business Cycles.
JEL Classification Codes: G01, G12, G15.
Analysis of the Education Upgraded Risk in the Vocational and Technical Education with the RMI-Related Departments in Taiwan
Li-Hua Lai and Li-Ann Huang
This paper intends to apply the variation measurement in risk measurement and to exploration the significant differences in the general universities and vocational/technological institutions that have been upgraded risk. In addition, there is evidence that, paired t-test statistics to examine the changes risk in Taiwan's vocational and technical education with the RMI-related departments and a case would be the effects on a test of change risk before and after upgraded. Our results show that a number of significant changes that can be expected to impact upgraded schools from junior colleges to institutes of technology with the RMI-related departments in technological and vocational education. The results of the study suggest that, with regard to education supply, the setting up of these departments has a statistically significant upgraded effect on student numbers and, with regard to education demand, a significant effect on numbers of courses, departments, teachers, classes, students and graduates. The results of may serve as one of reference for the subsequent studies on the change effects in the higher technological and vocational education.
Keywords: Higher education, vocational and technical education upgraded
Effect of Acquisition on Intellectual Capital in Target Companies Based on Two Approaches: Event Study and Accounting Basis
Behnam Nikkhah Boroujeni, Javad Movahedinia and Mohsen Asgari
Merger and acquisition strategy is one of the company-level strategies, which is adopted with the aim of synergy, reducing competition and increasing shareholders' wealth. The objective of this study was to analyze two approaches for investigating effect of strategic acquisition on intellectual capital in acquired companies in Iran. The statistical population included the acquired companies in Tehran Stock Exchange from 2004 to 2010, from which the statistical sample was selected. Based on accounting basis approach, the research data were calculated in two periods of before and after acquisition and the research hypotheses were tested using paired samples t-test. According to event study approach, value of acquired companies' stock was calculated as an independent variable and the research hypotheses were analyzed by Pearson test and panel data regression models. Investigations represented that intellectual capital had significant growth after acquisition; also, based on event study approach, significantly positive effect of acquisition on intellectual capital was found and lack of significant relationship was only observed between physical capital efficiency coefficient and acquisition in the target companies. However, there was no significant relationship between acquisition and intellectual capital according to accounting basis approach.
Keywords: Strategic acquisition, Intellectual capital, Value added coefficient, Target companies, Event study approach, Accounting basis approach.
Predicting Cash Return and Cost Return of Stock Using Artificial Neutral Network and Autoregressive Model in Companies Listed in Tehran Stock Exchange
Mehdi Baharmoghadam, Zeinolabedin Sadeghi and Hasan Sobhani
Stock return is one of the most important issues, which is always considered in performance analysis of investments in stock exchange. The present research studied prediction manner of cash return and cost return of stock using two models of autoregressive and artificial neutral networks. The statistical model of this research consisted of 55 companies from statistical population of companies listed in Tehran Stock Exchange (including four industries: chemical products and materials, transportation, other non-metallic mineral products and food and drink products, except sugar) between 2006 and 2011. The used neural network was based on fast forward architecture (FFWTD) using back propagation learning algorithm. To evaluate results of the two models, criteria of mean squared error (MSE), root mean squared error (RMSE) and coefficient of determination (R2) were utilized. Comparison between performance of autoregressive model and artificial neural networks on the one hand and results of the aforesaid models on the other showed that performance of artificial neural networks was better than that of autoregressive model in predicting cash return of stock. Moreover, performance of artificial neural network was better than that of autoregressive model in predicting cost return of stock.
Keywords: Artificial neural networks, prediction, cash return, cost return, Tehran Stock Exchange
Predicting Financial Crises through Early Warning Systems: A Case for South-East Asia
Muhammad Zahid Naeem and Gamini Premaratne
Any Early Warning System (EWS) to detect impending dangers to the economy must find ways of bringing together the scatter of upstream increase in risks. It should focus on all possible risk types to better capture instabilities. Previous studies usually take EMPI as only base index and capture turbulences though it is not appropriate because crises have different dimensions. Our study involves the use of four pressure indices in logit framework which takes into account maximum disruptions and captures all kinds of risks based on six key risk areas as recommended by IMF (2009). Sample and test analysis have been made to capture Asian Financial Crisis (AFC) and Global Financial Crisis (GFC) respectively for selected South-East Asian countries. Our variables performed well during AFC however many variables which were able to identify AFC, were unable to explain ambiguities during GFC indicating that there may exist indirect linkages to crisis and may involve other phenomenon such as contagion and spillovers.
Keywords: Early Warning System, Financial Crises, Pressure Indices, Risk Areas